UNITED STATES
                             SECURITIES AND EXCHANGE
                                   COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

X        ANNUAL REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934

            For the Fiscal Year Ended August 31, 2000

         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

            For the transition period from ______ to ______

                         COMMISSION FILE NUMBER: 0-18091

                               RSI HOLDINGS, INC.
                 (Name of small business issuer in its charter)

      North Carolina                                     56-1200363
(State or other jurisdiction of                      (I. R. S. Employer
incorporation or organization)                       Identification No.)

  28 East Court Street, Post Office Box 6847, Greenville, South Carolina 29606
               (Address of principal executive offices) (Zip Code)

Issuer's telephone number (864) 271-7171

Securities registered under Section 12(b) of the Exchange Act:

                                         (Name of each exchange on
         (Title of each class)               which registered)

                  None                             None

Securities registered under Section 12(g) of the Exchange Act:

                          Common Stock, par value $.01

                                (Title of Class)

     Check  whether  the issuer (1) filed all  reports  required  to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months,  (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days. Yes X No

         Check if there is no disclosure of delinquent  filers  pursuant to Item
405 of  Regulation  S-B  contained  in  this  form,  and no  disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

         State issuer's revenues for its most recent fiscal year.

     The  issuer's  revenues  from  operations  during  fiscal  year  2000  were
$753,000.

         State the aggregate  market value of the voting and  non-voting  equity
held by  non-affiliates  computed by  reference to the price at which the common
equity was sold, or the average bid and asked prices of such common  equity,  as
of a specified date within the past 60 days.  The aggregate  market value of the
voting stock held by non-affiliates as of October 26, 2000 was $188,000.

     State the number of shares  outstanding of each of the issuer's  classes of
common equity, as of the latest practicable date: October 26, 2000

         Common Stock, par value                   13,464,821 shares outstanding
              $.01 per share

DOCUMENTS INCORPORATED BY REFERENCE:  Portions of the Company's definitive Proxy
Statement,  to be filed pursuant to Regulation 14A for the annual  shareholders'
meeting currently  scheduled to be held on January 18, 2001, are incorporated by
reference into Part III.

         Transitional Small Business Disclosure Format: Yes    No  X



<PAGE>


PART I.

Item 1. Description of Business

         RSI Holdings,  Inc. (the "Company") was  incorporated in North Carolina
in 1978. The Company's wholly-owned  subsidiary,  HomeAdd Financial Corporation,
engaged through January 31, 2000 in the consumer finance business and originated
and sold consumer  finance  receivables,  substantially  all of which were loans
secured by mortgages on improved real estate. Effective at January 31, 2000, the
Company decided that HomeAdd should cease all business  activities and begin the
orderly liquidation of its assets and settlement of its liabilities. The Company
currently has no other business operations.

         Through  January  31,  2000,   HomeAdd  made  high  loan-to-value  debt
consolidation  and home improvement loans ("HLTV Loans") secured by mortgages to
customers  in South  Carolina,  North  Carolina,  Georgia,  Kentucky,  Maryland,
Connecticut,  Delaware  and  Florida.  HomeAdd  made  loans  secured  by  second
mortgages in which the total loans  outstanding  on the property  could be up to
125% of the estimated fair value of the real  property.  HomeAdd also made loans
that were  secured by first  mortgages in which the loans could be up to 100% of
the  estimated  fair value of the real  property.  These  loans were sold on the
secondary  market.  HomeAdd's  primary means of generating  business was through
direct mail solicitation, outgoing telephone solicitation and leads generated by
internet sources.

         The Company competed with finance companies,  banks and other financial
institutions,  many of which also  solicit  loan  business  through  direct mail
solicitation.  In  addition  to direct  mail  solicitations,  these  competitors
advertised through various other advertising media.

         Prior to discontinuing the consumer finance business, the Company had a
line of credit with a bank in the amount of $1,500,000 that was used to fund the
loans made to its customers.  This loan was  collateralized by the loans made by
HomeAdd  Financial  Corporation and by investments  aggregating  $500,000 in the
form of certificates of deposit.

         The Company did not have the financial  resources to make the loans and
hold them until their maturity;  thus the Company was dependent upon its ability
to sell  customer's  loans to third  party  purchasers.  The  Company  sold to a
limited number of wholesale lenders. Most of the Company's competitors generated
a greater  volume of loans than the  Company  and this gave the  competitors  an
advantage when dealing with the loan  purchasers  because the  purchasers  could
purchase in bulk from these large  originators  which reduced  their  processing
costs.  The Company  attempted to compete  primarily on the basis of service and
competitive  pricing.  The  Company  believes  that  it was a  relatively  small
competitor in its market.

         The Company was approved by the Federal Housing  Administration ("FHA")
as a FHA Title I lender and  accordingly  complied with Federal  regulations for
FHA Title I lenders. In addition,  HomeAdd complied with the banking regulations
of the various States in which it did business.  For further  information  about
the  operations of HomeAdd,  see Part II, Item 6,  "Management's  Discussion and
Analysis  of  Financial   Condition  and  Results  of   Operations,"   which  is
incorporated herein by reference.

         The  Company's  executive  offices are located at 28 East Court Street,
Greenville,  South Carolina,  29601. Its telephone number is (864) 271-7171.  At
August 31, 2000 the Company and its  operating  subsidiary  had a total of three
(3) employees, none of which are considered full-time.

                                       3
<PAGE>
Environmental Matters

The  Company is  subject  to  federal,  state and local  environmental  laws and
regulations,  however,  due to the nature of the Company's  current  activities,
such  laws and  regulations  do not have a  direct,  substantial  impact  on the
Company's business operations.

Item 2. Description of Property

         The  Company  leases  approximately  3,000  square  feet of floor space
located at 28 East Court  Street,  Greenville,  South  Carolina  to serve as its
principal executive offices.  The Company believes that the property is adequate
and suitable for executive  office space. The monthly rental expense incurred by
the Company was $2,250 under a month-to-month  lease  arrangement  through March
2000.  Effective  April 2000 the monthly  rental  payment was reduced to $1,500.
This lease includes office furniture and equipment.  The office space at 28 East
Court Street is leased from CTST, LLC. CTST, LLC is owned by three shareholders,
all of whom are  beneficial  owners  of more than 5% of the  outstanding  common
stock of the Company. One of the shareholders is the President,  Chief Executive
Officer and a director of the  Company  and the other two  shareholders  are his
adult  siblings.  The Company  believes that this lease  contains  provisions as
favorable to the Company as could be obtained from a third-party landlord.

         HomeAdd leased a facility at 850 South Pleasantburg Drive,  Greenville,
South Carolina  containing  approximately  4,600 square feet of finished  office
space through  August 31, 2000.  The Company paid $60,000  during August 2000 to
settle its obligation  under a five-year  lease  arrangement of $5,951 per month
that would have expired in September 2002.

         The Company  has no plans to invest in real  estate or persons  engaged
primarily  in real estate  activities,  nor does it have any formal  policy with
respect to such  investments.  As  discussed in Part I, Item 1  "Description  of
Business" and Part II, Item 6 "Management's Discussion and Analysis of Financial
Condition and Results of  Operations",  which  information  is  incorporated  by
reference  herein,  HomeAdd made loans secured by first and second  mortgages in
the ordinary course of business prior to discontinuing its operations.

         The Company  carries such  insurance as is  considered  reasonable  and
necessary to cover its casualty and  liability  exposures.  The insurance on the
two facilities described above is paid by the lessor.


Item 3. Legal Proceeding

         None.

Item 4. Submission of Matters to a Vote of Security Holders

         No matters were  submitted to a vote of securities  holders  during the
fourth quarter of the Company's 2000 fiscal year.

                                       4
<PAGE>

PART II

Item 5.  Market for Common Equity and Related Stockholder Matters.

         The  Company's  Common Stock is thinly  traded in the  over-the-counter
market by NASDAQ.  The high and low bid quotations of the Company's Common Stock
are set forth below for the fiscal quarters indicated, as reported by NASDAQ for
such periods.  These  quotations  reflect  inter-dealer  prices,  without retail
mark-up,  mark-down or  commission,  and may not  necessarily  represent  actual
transactions.

                                          2000                      1999

        Fiscal                      High        Low          High            Low

        First Quarter                .16        .05          .23             .06

        Second Quarter               .12        .05          .08             .05

        Third Quarter                .32        .05          .05             .04

        Fourth Quarter               .09        .03          .22             .04

         As of November 10, 2000, the Company had approximately 570 shareholders
of record.

         The Company  paid no cash  dividends  with  respect to its Common Stock
during fiscal 2000,  1999 and 1998, and does not intend to pay cash dividends in
the foreseeable future.






                                       5
<PAGE>
Item 6.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations

General

         Special Cautionary Notice Regarding Forward-Looking Statements.

         This Report on Form 10-KSB contains  forward-looking  statements within
the meaning of Section 27A of the  Securities  Act and 21E of the Exchange  Act.
Forward-looking  statements  are indicated by such terms as "expects",  "plans",
"anticipates",  and words to similar effect. Such forward-looking statements are
subject to known and unknown  risks,  uncertainties  and other  factors that may
cause the actual  results,  performance  or  achievements  of the  Company to be
materially different from future results,  performance or achievements expressed
or implied by such  forward-looking  statements.  Important factors ("Cautionary
Statements") that could cause the actual results, performance or achievements of
the Company to differ  materially from the Company's  expectations are disclosed
in this Report on Form 10-KSB.  All written or oral  forward-looking  statements
attributable  to the Company are  expressly  qualified in their  entirety by the
Cautionary Statements.

Sale of Assets

         On January 31, 2000 the Board of  Directors  of the Company  decided to
cease the business of its consumer  loan  business that was conducted by HomeAdd
Financial  Corporation  ("HomeAdd").  Effective  immediately,  HomeAdd began the
orderly liquidation of its assets and settlement of its liabilities. The Company
has no other business operations.

         The Company's  activities during the seven months subsequent to January
31, 2000 consisted primarily of selling the assets and paying the liabilities of
HomeAdd.  The following  paragraphs describe such activities and the composition
of the net assets of the Company at August 31, 2000.

         Cash and Cash Equivalents

         The Company had cash and cash  equivalents  in the amount of $20,000 as
of August 31, 2000.  The Company earned $12,000 and $30,000 on its cash and cash
equivalents and the restricted  investment  described in the following paragraph
during the five months  ended  January 31, 2000 and during the year ended August
31, 1999, respectively.

         Restricted Investment

         At August 31, 1999 the Company was  required,  as described in the debt
arrangements  discussion  elsewhere in this report, to maintain an investment in
HomeAdd of $500,000. In compliance with this agreement,  at August 31, 1999, the
assets of the Company  included a  certificate  of deposit  with a face value of
$500,000. During fiscal 2000 certain additional assets in the amount of $250,000
were  pledged  to the  bank  and the  bank  released  $250,000  of the  $500,000
certificate of deposit from the pledge. Accordingly,  the certificate of deposit
was  reduced  to  $250,000.  At the  maturity  date of March  22,  2000 the loan
facility had been  satisfied and the remaining  $250,000  certificate of deposit
was liquidated.


         Mortgage Notes Receivable Held for Sale

         At January  31,  2000  HomeAdd's  net assets  included  mortgage  notes
receivable in the amount of $353,000, net of deferred loan fees of $20,000. This
compares to mortgage notes receivable  aggregating  $1,705,000,  net of deferred

                                       6
<PAGE>
loan fees of  $115,000  at August  31,  1999.  The  reduction  in the  amount of
mortgage  notes held during the first five months of fiscal 2000  resulted  from
HomeAdd's reluctance to originate mortgages without a stable secondary market to
sell  the  mortgages  and the lack of  capital  to hold the  loans  until  their
maturity.  HomeAdd  sold all of its  outstanding  loans  during the seven months
subsequent to January 31, 2000.

         Property and equipment

         At January  31,  2000  HomeAdd's  net  assets  included  furniture  and
equipment with an original cost of approximately  $315,000 and net book value of
$211,000.   HomeAdd  sold   furniture  and   equipment   having  book  value  of
approximately   $187,000  for  approximately  $51,000  and  gave  furniture  and
equipment  having net book value of  approximately  $24,000 in settlement of the
July and August 2000 net rent aggregating  approximately $12,000.  Furniture and
equipment having net book value of approximately  $5,000 was retained for use by
the Company.

         Leased Properties

         For a  description  of the Company's  arrangements  with respect to its
current  and  prior  lease  obligations  reference  is made to Part I, Item 2. -
"Description of Property," which is incorporated herein by this reference.

         Liquidation Period Financing

         The liquidation  period began on February 1, 2000 and is expected to be
completed  by December 31, 2000.  Proceeds  from the sale of HomeAdd's  mortgage
notes  receivable and the sale of HomeAdd's  property and equipment were applied
to the payment of HomeAdd's and the Company's liabilities.  In addition to these
proceeds,  funds made available from the following debt facilities are available
for use during the liquidation period.

                  During February 2000,  Minor H. Mickel,  the mother of Buck A.
Mickel, President and Chief Executive Officer of the Company, loaned the Company
$400,000 under the terms of an 8% convertible note payable on February 16, 2005.
Under the terms of this debt,  all principal and unpaid  interest is convertible
into the Company's common stock at the conversion rate of $.075 per share at the
option of either the Company or the holder of the  convertible  note.  Effective
August 31,  2000,  the entire  principal  amount of  $400,000  plus all  accrued
interest aggregating $16,800 relating to the convertible note was converted into
5,557,333 shares of the Company's  common stock.  The Company issued  previously
unissued and unregistered stock to Mrs. Mickel.

         The Company used the proceeds of the $400,000  convertible note in part
to pay off the  Company's  working  capital  line of  credit  with a bank in the
amount of $150,000 and its $75,000 capital line of credit with another bank.

         During the year ended August 31, 1999,  the Estate of Buck Mickel,  the
former  Chairman of the Board and Chief  Executive  Officer of the Company  (and
Buck A. Mickel's  father),  loaned the Company $250,000 bearing interest at 8.5%
per year payable quarterly. Proceeds from the loan were used for working capital
and the principal is payable ten years from the date of the loan. During October
2000,  the Company  issued a note that is  convertible  into Common Stock of the
Company in exchange for this debt.

         The Company has a $500,000  loan  facility  with a bank that expires on
January  1,  2001.  A  corporation  that is owned  by the  President  and  Chief
Executive Officer,  his mother and his two adult siblings has guaranteed payment

                                       7
<PAGE>
of the loan and has pledged  certain  securities  as  collateral to the loan. At
August 31, 2000 the  outstanding  principal  balance payable under this $500,000
credit facility was $250,000.

         Adjustment to Liquidation Basis

         Because  the  Company  decided  in  January  2000 that it should  cease
HomeAdd's  existing business  operations and sell substantially all of HomeAdd's
operating  assets,  the  Company  has  reported  its  financial  position on the
liquidation  basis of accounting at August 31, 2000. In the liquidation basis of
accounting,  assets are valued at their net  realizable  value  (rather  than at
their net historical  cost), and liabilities  include estimated costs associated
with carrying out the sale of substantially all of the assets of HomeAdd.

         At  February  1, 2000,  in  accordance  with the  liquidation  basis of
accounting,  assets were restated to estimated realizable value net of estimated
costs of sale,  and  liabilities  were adjusted to include all  estimated  costs
associated with carrying out the liquidation of HomeAdd.  The total accruals and
costs required to convert from the going concern  (historical cost) basis to the
liquidation  basis of accounting was $564,000.  The adjustment to record the net
amount realized from the property and equipment was $143,000.  Additional  costs
of  $421,000  were  recorded  to include  additional  expenses  that the Company
expected to incur during the period of  liquidation  through  December 31, 2000.
These costs  include  anticipated  legal fees,  accounting  and  auditing  fees,
salaries,  lease  payments  that  include the $60,000 paid to settle the HomeAdd
lease through the expiration of its lease, insurance and other expenses that the
Company expects to incur prior to December 31, 2000.

         At August  31,  2000,  the  statement  of  deficiency  in net assets in
liquidation  included  accrued  expenses  in the amount of $31,000 to record all
known expenses  incurred through August 31, 2000, but not yet paid. As of August
31,  2000 the  Company's  estimated  costs to be incurred  during the  remaining
period of liquidation in the amount of $99,000 were accrued. These costs include
salaries  and related  costs of $34,000;  legal,  accounting,  and other  annual
reporting  costs of $20,000;  interest  expense of $16,000;  taxes of $7,000 and
various other administrative expenses of $22,000.

Historical Results of Operations

         Revenues were $753,000 during the five months ended January 31, 2000 as
compared to $1,370,000 during the year ended August 31, 1999. Revenues consisted
primarily of loan origination fees and gain from the sale of the loans made.

         Selling, general and administrative expenses were $1,187,000 during the
first five months of fiscal 2000 as compared to  $2,176,000  during fiscal 1999.
These expenses  include  expenses  incurred by HomeAdd of $1,057,000  during the
five months  ended  January 31, 2000 as compared to  $1,820,000  during the year
ended August 31, 1999. The HomeAdd  expenses  primarily  related to advertising,
salaries, and various administrative  expenses of HomeAdd. The remaining general
and administrative  expenses primarily  consisted of salaries,  legal, audit and
other  administrative  expenses incurred by the Company.  The expenses of fiscal
2000 as compared  to fiscal  1999  included  HomeAdd's  attempt to increase  the
volume of its loan  originations  during the fiscal 2000 period when HomeAdd was
experiencing increased difficulties in selling its loans.

         During  fiscal year 2000 and 1999,  net deferred tax benefits  were not
recorded relating to temporary differences since the Company is not assured that
the resulting additional deferred tax assets will be realized.

                                       8
<PAGE>
         The gain on sale of real estate  during the 1999 fiscal year of $71,000
related to the sale of the Company's real property from a previous  discontinued
operation  that was  located in Tampa,  Florida.  The  property  was sold during
November  1997, but the  uncollected  portion of the gain was deferred until the
proceeds from the sale were collected during fiscal 1999.

         HomeAdd  offered  HLTV  Loans  to  certain  qualified   borrowers  that
permitted  the  loan  proceeds  to be  used  for  debt  consolidation  and  home
improvements. Under the terms of these HLTV Loans, HomeAdd made loans secured by
second mortgages in which the total loans  outstanding on that property could be
up to 125% of the  estimated  fair  value  of the  real  property.  A  qualified
borrower was  required to be a homeowner  with  acceptable  levels of income and
have an acceptable  credit history.  Substantially all of the loan volume during
the five months ended January 31, 2000 and during fiscal 1999  consisted of HLTV
Loans.

         During the third  quarter of fiscal 1999 HomeAdd began  offering  loans
that were secured by first  mortgages.  None of these  mortgages were made until
the fourth quarter.  These loans could be up to 100% of the estimated fair value
of the property.

         During fiscal 1999, HomeAdd was authorized to operate under the laws of
South  Carolina,  North  Carolina,  Georgia,  Kentucky,  Connecticut,  Delaware,
Maryland, Massachusetts,  Tennessee, and Florida. During fiscal 2000 HomeAdd was
approved  to  operate  under  the  banking  laws  of the  additional  states  of
Minnesota, Missouri, Oregon, Utah and Wisconsin.

         The Company  sold  substantially  all of the loans it  originated  on a
non-recourse  basis in the secondary market.  The non-recourse  basis means that
the  Company  represented  that  loans  were  properly  documented  and  made in
accordance with applicable lending criteria, but that the purchaser of the loans
assumed the full credit risk. The Company's credit  guidelines for its loans met
the underwriting  criteria of the loan purchasers.  During the five months ended
January 31, 2000, the Company made loans  aggregating  $9,300,000 as compared to
loans aggregating  $15,045,000 during the year ended August 31, 1999. All of the
mortgage notes were sold in the secondary market.

         During fiscal 1999 the Company solicited loans in South Carolina, North
Carolina,  Georgia, Florida,  Kentucky,  Maryland,  Connecticut and Delaware. In
addition  to  the  states  listed  above,   the  Company   solicited   loans  in
Massachusetts,  Minnesota, Missouri, Oregon, Utah and Wisconsin during the first
five months of fiscal 2000.

         Debt  consolidation  and home  equity  loan  volume  typically  was not
materially  impacted by seasonal  climate  changes  and,  with the  exception of
slowdowns  during the  holiday and  vacation  seasons,  tended to be  relatively
stable throughout the year.

         HomeAdd attempted to sell, on a non-recourse basis, all of its loans on
the secondary market to wholesale buyers.  HomeAdd did not have the capital that
would be necessary to originate a significant  volume of loans without  promptly
selling  its loans on the  secondary  market.  During the year ended  August 31,
1999, many of the wholesale  buyers in this industry,  including  certain of the
buyers of HomeAdd's loans,  announced that they will no longer purchase loans in
the secondary  market.  During the year ended August 31, 1999,  the Company sold
approximately  84% of its loans to a federal bank in  California.  During fiscal
2000 this bank  reduced  the  number of loans that it would  buy,  which  caused

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<PAGE>
increased difficulties for HomeAdd in selling its loans. Although HomeAdd sought
to replace the bank in  California  with other  purchasers  of mortgages  and to
operate profitably, it was unable to do so.

         This  adverse  change in the number of  wholesale  buyers  reduced  the
competition in the secondary  market and reduced the amount of gain that HomeAdd
realized  on its loans  during the  fiscal  1999  year.  Adverse  changes in the
secondary market  materially  impaired  HomeAdd's  ability to originate and sell
loans on a favorable or timely basis. Delays in the sale of a loan pool beyond a
quarter-end  could result in greater losses for such quarter.  The  difficulties
that HomeAdd experienced in selling its loans on the secondary market during the
first five months of fiscal 2000 materially impaired its ability to grow and its
results  of  operations  and  financial  condition  were  materially   adversely
affected.

         During  fiscal 1999 HomeAdd  generated  substantially  all its business
through  direct  mail and  telemarketing  solicitations.  During  the first five
months of fiscal 2000  HomeAdd  generated  its  business  through  telemarketing
solicitations and began receiving leads generated from the Internet.

         The Company  experienced the effects of higher credit  standards in the
resale  market for its loans during the first five months of fiscal  2000.  This
was caused by an investor market that was becoming more conservative and also by
banking  regulators  that were exercising a greater degree of oversight over the
federal banks that were purchasing  HomeAdd's  products in the secondary market.
These  factors  resulted in higher  credit  requirements  for its  customers and
reduced  premiums that the Company was able to receive on the sale of its loans.
This had an adverse effect on the loan origination  volume and  profitability on
the loans originated during the first five months of fiscal 2000.

Liquidity and Capital Resources

         Anticipated Liquidity Requirements

         Certain  of  the  Company's   shareholders   have  advanced  funds  and
guaranteed  debt under the debt  arrangements  as  discussed  below  under "Debt
Arrangements".  At  August  31,  2000,  the  Company's  liabilities,   including
estimated  costs during the remaining  period of  liquidation,  exceeded the net
realizable  value of its assets by $595,000.  The Company has no assurance  that
its debt  arrangements  will be  available  to  allow it to pay its  liabilities
during its liquidation period.

         Cash and Cash Equivalents

         The Company had cash and cash  equivalents  in the amount of $20,000 as
of August 31, 2000.  The Company earned $12,000 and $30,000 on its cash and cash
equivalents and the restricted  investment  described in the following paragraph
during the five months  ended  January 31, 2000 and during the year ended August
31, 1999, respectively.

         Restricted Investment

         At August 31, 1999 the Company was required,  as described  below under
"Debt  Arrangements",  to  maintain an  investment  in HomeAdd of  $500,000.  In
compliance  with this  agreement,  at August 31, 1999, the assets of the Company
included a certificate  of deposit with a face value of $500,000.  During fiscal
2000  certain  additional  assets in the amount of $250,000  were pledged to the
bank and the bank released $250,000 of the $500,000  certificate of deposit from
the pledge. Accordingly,  the certificate of deposit was reduced to $250,000. At
the maturity date of March 22, 2000 the loan facility had been satisfied and the
remaining $250,000 certificate of deposit was liquidated.

                                       10
<PAGE>
         Debt Arrangements

         HomeAdd  financed  loans  to  its  customers  with  borrowings  from  a
warehouse line of credit with a bank in the amount of $1,500,000. The loans made
to third parties by HomeAdd were  collateral for this line of credit.  This line
of  credit  bore  interest  at the  bank's  prime  rate.  Under the terms of the
agreement  the  aggregate  amount  outstanding  on the line of credit  could not
exceed 90% of the aggregate  amount of customer loans  disbursed and outstanding
by HomeAdd.  Also,  HomeAdd was required to repay any advances within 25 days of
the date of the advance and HomeAdd was required to maintain  tangible net worth
of at least  $500,000.  The bank  also  required  that this  tangible  net worth
include  certain  specified  assets  with  maturity of five years or less in the
amount of $250,000 and that certain  additional  specified  assets be pledged to
the bank in the amount of $250,000.  This bank line was satisfied  during fiscal
2000.

         Effective  April  30,  1999,  the  Company  executed  a  $500,000  loan
agreement with a bank.  This credit facility bears interest at the prime rate of
the bank.  The loan is  payable on demand of the bank or in any event on January
1,  2001.  A  corporation  that is owned by the  President  and Chief  Executive
Officer,  his mother and his two adult  siblings has  guaranteed  payment of the
loan and has pledged certain securities as collateral to the loan.

         During the year ended August 31, 1999,  the Estate of Buck Mickel,  the
former Chairman of the Board and Chief Executive Officer of the Company,  loaned
the  Company  $250,000  bearing  interest  at 8.5% per year  payable  quarterly.
Proceeds  from the loan were  used for  working  capital  and the  principal  is
payable ten years from the date of the loan.  During  March  2000,  the loan was
transferred from the Estate of Buck Mickel to Minor H. Mickel, the widow of Buck
Mickel.  During October 2000, the Company issued a note that is convertible into
Common Stock of the Company in exchange for this debt.

         Year 2000

         The  Company  successfully   addressed  the  Year  2000  issue  through
implementation of a systematic,  disciplined plan. The Company did not incur any
substantive  Year  2000  costs  and is not  aware of any  negative  consequences
involving the Company itself,  its vendors,  or its customers as a result of the
Y2K issue.

Item 7.   Financial Statements

          The response to this Item is set forth on page F-2 and  submitted as a
separate section of this report.

Item 8.   Changes in and Disagreements with Accountants on Accounting and
          Financial Disclosure

          None



                                       11
<PAGE>
PART III

Item 9.   Directors,   Executive  Officers,  Promoters  and   Control   Persons;
          Compliance with Section 16(a) of the Exchange Act

Item 10.  Executive Compensation

Item 11.  Security Ownership of Certain Beneficial Owners and Management

Item 12.  Certain Relationships and Related Transactions

         Information  required  under  Items  9,  10,  11 and 12 of Part  III is
incorporated  herein  by  reference  to the  portions  of the  definitive  Proxy
Statement to be filed with the Securities and Exchange Commission on or prior to
120 days following the end of the Company's fiscal year.

Item 13. Exhibits, and Reports on Form 8-K

(a)           Listing of Exhibits

3.1       Articles  of  Incorporation   of  RSI  Holdings,   Inc.,  as  amended:
          Incorporated by reference to Exhibit 3.2 and 3.2.2 to the Registration
          Statement on Form S-4 of RSI  Corporation and Porter  Brothers,  Inc.,
          File No. 33-30247 (the "Form S-4").

3.1.1     Articles of  Amendment  and  Certificate  of  Reduction  of Capital of
          Porter Brothers, Inc.: Incorporated by reference to Exhibit 4.1 to the
          Form 8-K of the  Registrant  filed with the  Securities  and  Exchange
          Commission on November 28, 1989, File No. 0-7067.

3.2.1     By-laws of RSI Holdings,  Inc., as amended:  Incorporated by reference
          to Exhibit 3.1.1 to the Form S-4.

3.2.2     Amendments to By-laws:  Incorporated  by reference to Exhibit 3.2.2 to
          the Form  10-KSB  of the  Registrant  filed  with the  Securities  and
          Exchange  Commission  for the fiscal year ended August 31, 1996,  File
          No. 0-18091.

4.1       See Exhibits 3.1, 3.1.1, 3.2.1 and 3.2.2.

4.1.1     Specimen  of  Certificate  for  RSI  Holdings,   Inc.,  common  stock:
          Incorporated by reference to Exhibit 4.1.2 to the Form S-4.

*10.1     RSI  Holdings,  Inc.,  Stock  Option  Plan,  including  an  amendment:
          Incorporated  by  reference  to  Exhibit  10.9 to the Form 10-K of the
          Registrant  filed with the Securities and Exchange  Commission for the
          fiscal year ended  August 31, 1990,  File No.  0-18091 (the "1990 Form
          10-K").

*10.1.1   Amendment  No. 2 to Stock  Option Plan:  Incorporated  by reference to
          Exhibit  10.9.1  to the Form  10-K of the  Registrant  filed  with the
          Securities  and Exchange  Commission  for the fiscal year ended August
          31, 1992, as amended, File No. 0-18091 (the "1992 Form 10-K").

*10.1.2   Amendment  No. 3 to  Stock  Option Plan:  Incorporated by reference to
          Exhibit 99.1 to the Company's Registration Statement on Form S-8 filed
          with the  Securities  and  Exchange  Commission  on  September 9, 1998
          (Commission File No. 333-63109).

                                       12
<PAGE>
*10.1.3   Amendment  No. 4  to  Stock Option Plan:  Incorporated by reference to
          Exhibit 99.1 to the Company's Registration Statement on Form S-8 filed
          with the  Securities  and  Exchange  Commission  on February  10, 1999
          (Commission File No. 333-72101).

10.1.4    Amendment  No.  5 to Stock Option Plan:  Incorporated  by reference to
          Exhibit A to the Company's  Definitive  Proxy Statement filed with the
          Securities  and Exchange  Commission on December 30, 1999  (Commission
          File No. 333-72101).

*10.2     RSI  Holdings,   Inc.   Incentive  Stock  Award  Plan,   including  an
          amendment:  Incorporated by reference to Exhibit 10.8 to the 1990 Form
          10-K.

*10.2.1   Amendment  to  Incentive  Stock Award Plan:  Incorporated by reference
          to Exhibit 10.8.1 to the 1992 Form 10-K.

*10.3     Stock Option  Agreement by and between the  Registrant  and Charles M.
          Bolt dated as of July 2, 1997:  Incorporated  by reference to the Form
          10-KSB  of the  Registrant  filed  with the  Securities  and  Exchange
          Commission for the year ended August 31, 1997, File No. 0-18091.

*10.4     Stock  Option  Agreement by and between the  Registrant  and C. C. Guy
          dated as of April 22,  1998:  Incorporated  by  reference  to the Form
          10-KSB  of the  Registrant  filed  with the  Securities  and  Exchange
          Commission for the year ended August 31, 1998, File No. 0-18091.

*10.5     Stock Option  Agreement by and between the  Registrant  and Charles M.
          Bolt dated as of April 22, 1998: Incorporated by reference to the Form
          10-KSB  of the  Registrant  filed  with the  Securities  and  Exchange
          Commission for the year ended August 31, 1998, File No. 0-18091.

*10.6     Stock  Option  Agreement by and between the  Registrant  and C. Thomas
          Wyche dated as of April 22,  1998:  Incorporated  by  reference to the
          Form 10-KSB of the  Registrant  filed with the Securities and Exchange
          Commission for the year ended August 31, 1998, File No. 0-18091.

*10.7     Stock  Option  Agreement by and between the  Registrant  and C. C. Guy
          dated as of August 18,  1999:  Incorporated  by  reference to the Form
          10-KSB  of the  Registrant  filed  with the  Securities  and  Exchange
          Commission for the year ended August 31, 1999, File No. 0-18091.

*10.8     Stock Option  Agreement by and between the  Registrant  and Charles M.
          Bolt dated as of August 18,  1999:  Incorporated  by  reference to the
          Form 10-KSB of the  Registrant  filed with the Securities and Exchange
          Commission for the year ended August 31, 1999, File No. 0-18091.

*10.9     Stock  Option  Agreement by and between the  Registrant  and C. Thomas
          Wyche dated as of August 18,  1999:  Incorporated  by reference to the
          Form 10-KSB of the  Registrant  filed with the Securities and Exchange
          Commission for the year ended August 31, 1999, File No. 0-18091.

10.10     Subordinated  Promissory  Notes  numbered  1 through  25 issued by RSI
          Holdings,  Inc. payable to the order of the Estate of Buck Mickel. The
          terms of each Note are  identical  to those  set forth in the  exhibit
          except as to the date of the Note and the date of the  first  interest
          payment,  which  are  as  set  forth  in  the  accompanying  schedule:
          Incorporated  by reference to the Form 10-QSB of the Registrant  filed
          with the  Securities  and Exchange  Commission  for the fiscal quarter
          ended November 30, 1998, File No. 0-18091.

                                       13
<PAGE>
10.11     Extension  Letter  dated  December 27, 1999 by and between the Company
          and First Union National Bank:  Incorporated  by reference to the Form
          10-QSB  of the  Registrant  filed  with the  Securities  and  Exchange
          Commission for the fiscal  quarter ended  November 30, 1999,  File No.
          0-18091.

10.12     Convertible  note  issued by the Company  payable to Minor H.  Mickel:
          Incorporated  by reference to the Form 10-QSB of the Registrant  filed
          with the  Securities  and Exchange  Commission  for the fiscal quarter
          ended February 29, 2000, File No. 0-18091.

10.13     Promissory  note dated July 12,  2000 by and  between  the Company and
          First Union National Bank, together with related documents.

10.14     Lease Agreement by and between Hewitt Coleman Companies,  Inc., Lessor
          and  HomeAdd  Financial  Corporation,  Lessee  dated  August 4,  1997:
          Incorporated  by reference to the Form 10-KSB of the Registrant  filed
          with the Securities and Exchange  Commission for the year ended August
          31, 1997, File No. 0-18091.

10.14.1   First   Amendment to  Lease  Agreement  by and between  Hewitt Coleman
          Companies,  Inc.,  Lessor and HomeAdd  Financial  Corporation,  Lessee
          dated July 7, 1998:  Incorporated  by  reference to the Form 10-KSB of
          the Registrant  filed with the Securities and Exchange  Commission for
          the year ended August 31, 1998, File No. 0-18091.

10.15     Convertible  note dated October 10, 2000 issued by the Company payable
          to Minor H. Mickel.

21.       Subsidiaries of the Registrant.

23.       Consent of Independent Certified Public Accountants.

27.       Financial Data Schedule (For SEC use only)

* Management  contract or  compensatory  plan required to be filed as an exhibit
pursuant to Item 13 of Form 10-KSB.

          (b)      Reports on Form 8-K:

                   None.







                                       14
<PAGE>

                                   SIGNATURES




In  accordance  with  Section 13 or 15 (d) of the Exchange  Act, the  registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

RSI HOLDINGS, INC.                                                     TITLE


/s/ Buck A. Mickel                   November 29, 2000       President and Chief
--------------------------               (Date)              Executive Officer
Buck A. Mickel                                              (Principal Executive
                                                                   Officer)


In  accordance  with the Exchange  Act, this report has been signed below by the
following  persons on behalf of the  registrant and in the capacities and on the
dates indicated.



/s/ Buck A. Mickel                   November 29, 2000       Director, President
---------------------------                (Date)            and Chief Executive
Buck A. Mickel                                                       Officer
                                                            (Principal Executive
                                                                     Officer)


/s/ C. C. Guy                        November 29, 2000       Director
----------------------------            (Date)
C. C. Guy


/s/ Charles M. Bolt                  November 29, 2000       Director
----------------------------             (Date)
Charles M. Bolt



/s/ Joe F. Ogburn                    November 29, 2000       Vice President and
-----------------------------             (Date)             Treasurer
Joe F. Ogburn                                           (Principal Financial and
                                                            Accounting Officer)








                                       15
<PAGE>









                          Annual Report on Form 10-KSB

                   Item 7, Item 14(a)(1) and (2), (c) and (d)

                          List of Financial Statements

                              Financial Statements

                           Year ended August 31, 2000

                               RSI Holdings, Inc.

                           Greenville, South Carolina






















                                       F-1


<PAGE>


                               RSI HOLDINGS, INC.

                        Form 10-KSB-Item 14(a)(1) and (2)

                          Index of Financial Statements


The  following  consolidated  financial  statements  of RSI  Holdings,  Inc. are
included in Item 7:

     Consolidated  statement of deficiency in net assets in liquidation - August
     31, 2000

     Consolidated  statement  of changes in net assets in  liquidation  - Period
     from February 1, 2000 through August 31, 2000

     Consolidated  statements  of operations - For the five months ended January
     31, 2000 and year ended August 31, 1999

     Consolidated statements of shareholders' equity - Five months ended January
     31, 2000 and year ended August 31, 1999

     Consolidated  statements  of cash flows - For the five months ended January
     31, 2000 and year ended August 31, 1999

     Notes to consolidated financial statements - August 31, 2000























                                       F-2


<PAGE>






                          INDEPENDENT AUDITOR'S REPORT



To the Board of Directors
RSI Holdings, Inc.
Greenville, South Carolina

         We have audited the consolidated statement of net assets in liquidation
of RSI  Holdings,  Inc. and  Subsidiaries  as of August 31, 2000 and the related
consolidated  statement of changes in net assets in  liquidation  for the period
from February 1, 2000 to August 31, 2000 and the related consolidated statements
of  operations,  shareholders'  equity,  and cash flows for the five months from
September  1, 1999 to January 31, 2000 and for the year ended  August 31,  1999.
These consolidated  financial statements are the responsibility of the Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements based on our audits.

         We conducted our audits in accordance with generally  accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable  assurance about whether the  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
consolidated  financial  statement  presentation.  We  believe  that our  audits
provide a reasonable basis for our opinion.

         As described in Note 2 to the consolidated  financial  statements,  the
shareholders of RSI Holdings, Inc. approved a plan of liquidation on January 31,
2000, and the Company began liquidation  shortly  thereafter.  As a result,  the
Company changed its basis of accounting for periods after January 31, 2000, from
the going concern basis to the liquidation basis.

         In our opinion,  the consolidated  financial  statements referred to in
the first paragraph present fairly, in all material  respects,  the consolidated
financial position of RSI Holdings, Inc. and Subsidiaries as of August 31, 2000,
and the related  consolidated  changes in net assets in liquidation for the five
months then ended,  and the  consolidated  results of operations,  shareholders'
deficit,  and cash flows for the period  from  September  1, 1999 to January 31,
2000,  and for the year  ended  August 31,  1999 in  conformity  with  generally
accepted accounting  principles applied on the bases of accounting  described in
the preceding paragraph.

                                          /s/  Elliott, Davis & Company, LLP


Elliott, Davis & Company, L.L.P.
Greenville, South Carolina
November 17, 2000




                                       F-3
<PAGE>
<TABLE>
<CAPTION>

                               RSI HOLDINGS, INC.
        CONSOLIDATED STATEMENT OF DEFICIENCY IN NET ASSETS IN LIQUIDATION
                                 AUGUST 31, 2000


                                     ASSETS

    <S>                                                                       <C>

    Cash                                                                      $        20,000
    Accounts receivable                                                                 9,000
    Property and equipment                                                             11,000
                                                                              ---------------

                                                                                       40,000

                                   LIABILITIES

    Accounts payable                                                                    5,000
    Note payable - bank                                                               250,000
    Notes payable to a shareholder                                                    250,000
    Accrued expenses and other liabilities                                             31,000
    Estimated costs during the remaining period of liquidation                         99,000
                                                                              ---------------

                                                                                      635,000
                                                                              ---------------
    Deficiency in net assets                                                  $     (595,000)
                                                                              ===============



</TABLE>





















       The  accompanying  notes  are  an  integral  part  of  this  consolidated
financial statement.

                                       F-4


<PAGE>
<TABLE>
<CAPTION>


                               RSI HOLDINGS, INC.
         CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
              PERIOD FROM FEBRUARY 1, 2000 THROUGH AUGUST 31, 2000






<S>                                                                             <C>

Shareholders' deficit at February 1, 2000                                       $  (448,000)

Activity that provided net assets:
     Conversion of debt to common stock                                             417,000

Accruals and activities that used net assets:
     Adjustment of property and equipment to estimated net realizable value         143,000
     Compensation and related expenses                                              146,000
     Interest expense                                                                58,000
     Professional fees                                                               39,000
     Rent                                                                           132,000
     Other                                                                           46,000
                                                                                  ----------

         Total accruals and costs during period of liquidation                     (564,000)
                                                                                   ---------


Deficiency in net assets in liquidation at August 31, 2000                      $ (595,000)
                                                                                ===========




</TABLE>



















The  accompanying  notes are an  integral  part of this  consolidated  financial
statement.

                                       F-5


<PAGE>
<TABLE>
<CAPTION>


                                                       RSI HOLDINGS, INC.
                                              CONSOLIDATED STATEMENTS OF OPERATIONS
                              FOR THE FIVE MONTHS ENDED JANUARY 31, 2000 and YEAR ENDED AUGUST 31, 1999




                                                                                               2000                1999
                                                                                       -----------------   ------------------

<S>                                                                                    <C>                 <C>

REVENUES
    Origination fees                                                                   $         648,000   $     1,126,000
    Gain on sale of loans                                                                        105,000           244,000
                                                                                       -----------------   ---------------
       Total revenues                                                                            753,000         1,370,000

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES                                                   1,187,000         2,176,000
                                                                                       -----------------   ---------------
       Loss from operations                                                                    (434,000)          (806,000)
                                                                                       ----------------    ---------------

OTHER INCOME (EXPENSES)
    Interest income                                                                               91,000           118,000
    Gain on sale of real estate                                                                        -            71,000
    Other                                                                                              -             1,000
    Interest expense                                                                             (51,000)          (63,000)
                                                                                       ------------------  ---------------
       Total other income                                                                         40,000           127,000
                                                                                       -----------------   ---------------
       Net loss before income taxes                                                             (394,000)         (679,000)
       Income taxes                                                                                    -                 -
                                                                                       -----------------   ---------------

NET LOSS                                                                               $        (394,000)  $      (679,000)
                                                                                       =================   ===============

NET LOSS PER COMMON SHARE - BASIC AND DILUTED                                          $            (.05)  $          (.09)
                                                                                       =================   ===============

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING                                                  7,905,914         7,903,219
                                                                                       =================   ===============




</TABLE>












       The  accompanying  notes  are an  integral  part  of  these  consolidated
financial statements.

                                                               F-6


<PAGE>
<TABLE>
<CAPTION>


                               RSI HOLDINGS, INC.
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
    For the five months ended January 31, 2000 and year ended August 31, 1999



                                                                            Additional
                                                 Common stock                 paid-in       Retained
                                            Shares         Amount             capital        deficit             Total

<S>                                       <C>           <C>              <C>             <C>               <C>

BALANCE, AUGUST 31, 1998                    7,900,822   $       79,000   $   3,776,000   $   (3,231,000)   $       624,000

    Proceeds from stock options
       exercised                                2,500                -           1,000                -              1,000
    Net loss                                        -                -               -         (679,000)          (679,000)
                                          -----------   --------------   -------------   --------------    ---------------

BALANCE, AUGUST 31, 1999                    7,903,322           79,000       3,777,000       (3,910,000)          (54,000)

    Net loss                                        -                -               -         (394,000)          (394,000)
                                          -----------   --------------   -------------   --------------    ---------------

BALANCE, JANUARY 31, 2000                   7,903,322   $       79,000   $   3,777,000   $   (4,304,000)   $      (448,000)
                                          ===========   ==============   =============   ==============    ===============












</TABLE>
















          The  accompanying  notes are an  integral  part of these  consolidated
financial statements.

                                       F-7
<PAGE>
<TABLE>
<CAPTION>

                               RSI HOLDINGS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
    FOR THE FIVE MONTHS ENDED JANUARY 31, 2000 and YEAR ENDED AUGUST 31, 1999




                                                                                               2000                  1999
                                                                                          --------------         -----------
<S>                                                                                    <C>                 <C>

OPERATING ACTIVITIES
    Net loss                                                                           $      (394,000)    $      (679,000)
    Adjustments to reconcile net loss to net
       cash provided by (used for) operating activities
       Depreciation and amortization                                                             24,000             55,000
       Gain on sale of property and equipment                                                        -             (71,000)
       Changes in operating assets and liabilities
           Mortgage notes receivable                                                          1,352,000           (853,000)
           Prepaid expenses and other                                                            70,000            (55,000)
           Accounts payable, accrued expenses and other liabilities                             (7,000)              36,000
                                                                                       ----------------    ----------------
              Net cash provided by (used for) operating activities                            1,045,000        (1,567,000)
                                                                                       ----------------    --------------
INVESTING ACTIVITIES
    Proceeds from sale of property and equipment                                                      -             85,000
    Reduction of certificate of deposit                                                         250,000                  -
    Purchase of property and equipment                                                          (40,000)           (72,000)
                                                                                       -----------------   ----------------

              Net cash provided by investing activities                                         210,000             13,000
                                                                                       ----------------    ---------------
FINANCING ACTIVITIES
    Advances under bank lines of credit                                                       6,308,000         12,980,000
    Payments on bank lines of credit                                                         (7,319,000)       (11,686,000)
    Proceeds from long-term notes payable                                                             -            250,000
    Payment of deferred compensation                                                            (25,000)           (60,000)
    Other                                                                                         1,000                  -
                                                                                       -----------------   ---------------
              Net cash (used for) provided by financing activities                           (1,035,000)         1,484,000
                                                                                       -----------------   ---------------
              Net increase (decrease) in cash                                                   220,000           (70,000)

CASH, BEGINNING OF PERIOD                                                                        23,000             93,000
                                                                                       ----------------    ---------------
CASH, END OF PERIOD                                                                    $        243,000    $        23,000
                                                                                       ================    ===============


CASH PAID FOR
    Interest                                                                           $         52,000    $        58,000
                                                                                       ================    ===============
    Income taxes                                                                       $              -    $             -
                                                                                       ================    ===============


</TABLE>


           The  accompanying  notes are an integral  part of these  consolidated
financial statements.

                                       F-8


<PAGE>


                               RSI HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1 - NATURE OF OPERATIONS AND BASIS OF ACCOUNTING
-----------------------------------------------------

The  Company  and  its  principal   operating   subsidiary,   HomeAdd  Financial
Corporation  and  its  wholly-owned   subsidiary,   HomeAdd  Financial  Services
Corporation (collectively referred to as HomeAdd), were primarily engaged in the
business of originating and selling second mortgage residential loans. The funds
for these loans were obtained principally through the utilization of a bank line
of credit.

HomeAdd sold more than 90% of its loans to a single  federal bank in  California
during the months from January 1999 through  August 1999.  During the first five
months of fiscal  year 2000 this bank  reduced the number of loans that it would
buy,  which  caused  increased  difficulties  for  HomeAdd in selling its loans.
Although  HomeAdd sought to replace the bank in California with other purchasers
of mortgages and to operate profitably, it was unable to do so.

The Company had experienced significant recurring losses and had working capital
deficiencies.  Because of the increased  difficulties  of HomeAdd in selling its
loans as described above, the Company decided to cease all of HomeAdd's business
operations effective January 31, 2000.

BASIS OF PRESENTATION

As a result of the decision to cease all of HomeAdd's business  operations,  the
Company  changed its basis of  accounting  for its  financial  statements  as of
January 31, 2000 from the going concern  basis of accounting to the  liquidation
basis of accounting in accordance with generally accepted accounting principles.
Consequently,  assets have been valued at estimated  net  realizable  values and
liabilities are presented at their estimated settlement amounts, including costs
associated with carrying out the liquidation.  The actual  realization of assets
and  settlement of liabilities  could be higher or lower than amounts  indicated
and are based upon  management's  estimates as of August 31,  2000.  Differences
between the revalued amounts and actual cash  transactions will be recognized in
the year they can be determined.

USE OF ESTIMATES

The  preparation of the financial  statements of the Company in accordance  with
generally accepted  accounting  principles requires management to make estimates
and  assumptions  that affect  reported  amounts.  These  estimates are based on
information  available as of the date of the  financial  statements.  Therefore,
actual results could differ from those estimates.

NOTE 2 - PLAN OF LIQUIDATION
----------------------------

Effective  with the decision to cease all of HomeAdd's  operations,  the Company
began the orderly  liquidation of the assets of HomeAdd and the settlement of it
liabilities.  The Company has been successful in selling  substantially  all the
assets of HomeAdd and in settling the known obligations of HomeAdd.  The Company
currently  anticipates  that it will complete the  liquidation of HomeAdd by its
target date of December 31, 2000.

                                       F-9

<PAGE>
The Company expects that the deficiency in net assets will be personally  funded
by loans either directly with or guaranteed by the President and Chief Executive
Officer of the Company and other members of his family (all major shareholders).
The  Company  anticipates  that the  amounts  that are  personally  funded  will
ultimately  be  converted  into  common  stock  of  the  Company.   The  Company
anticipates that no material assets of the Company will remain at the end of the
liquidation  period.  Although  the Company  intends to look for other  business
opportunities,  it cannot  determine at this time what, if any,  future business
activities it may engage in.

NOTE 3 - NOTES PAYABLE
----------------------
<TABLE>

<S>                                                                                        <C>

Bank line of credit in the amount of $500,000  with  interest due monthly at the
    bank's prime rate (9.5 percent at August 31, 2000) and principal due in full
    on demand but no later than January 1, 2001. A corporation  that is owned by
    the President and Chief Executive Officer of the Company, his mother and two
    adult  siblings has guaranteed  payment of the loan and has pledged  certain
    securities as collateral to the loan.                                                        250,000

Unsecured  notes  payable  to the widow of the former  chairman  of the Board of
    Directors of the Company with  interest  due  quarterly at 8.5 percent.  The
    principal  is due ten years from the date of the notes.  The notes are dated
    from October 15, 1998 to December 15, 1998. During October 2000, the Company
    issued a note that is  convertible  at the option of the holder  into Common
    Stock of the Company in exchange for this debt.                                              250,000
                                                                                            ------------

                                                                                            $    500,000
                                                                                            ------------
</TABLE>


     The Company incurred  interest cost as follows during the first five months
of fiscal 2000 and during the entire fiscal 1999 year.
<TABLE>
<CAPTION>

                                                                                                2000         1999
                                                                                             --------     --------
    <S>                                                                                      <C>          <C>

    Arrangements in connection with loan facilities with banks                               $ 41,000     $ 41,000
    Notes payable to the estate of the former chairman of the Board of Directors                9,000       16,000
    Deferred compensation                                                                       1,000        6,000
                                                                                            ----------   ---------

                                                                                            $  51,000     $ 63,000
                                                                                            =========     ========







</TABLE>








                                      F-10

<PAGE>

NOTE 4 - STOCK OPTION PLAN
--------------------------

             On November 15, 1991, the Company  adopted a Stock Option Plan that
authorizes  the Board of Directors to grant  options of up to 250,000  shares of
the Company's  common stock.  On January 27, 2000,  January 21, 1999 and January
15, 1998, the  shareholders of the Company  approved  increases in the aggregate
number of shares  issuable in the Stock  Option Plan in the amount of 500,000 on
each of these dates. Accordingly,  the Board of Directors is authorized to grant
options of up to 1,750,000  shares of the Company's  common stock.  As of August
31, 2000,  555,000 shares (net of 755,000 shares forfeited) have been awarded to
plan participants.

             The  Company  also has an  informal  stock  option plan under which
stock  options can be granted to certain  non-employee  officers and  directors.
Under this plan 110,000 options have been granted.

             All  options  under the plans  were  granted  at not less than fair
market value at dates of grant. Stock option  transactions  during the two years
ended August 31 were as follows:
<TABLE>
<CAPTION>


                                                                                                2000             1999
                                                                                          --------------   -------------
<S>                                                                                       <C>              <C>

Options outstanding at September 1                                                             1,347,500         745,000
Options granted                                                                                        -         670,000
Options exercised                                                                                 (4,166)         (2,500)
Options forfeited                                                                               (690,000)        (65,000)
                                                                                          --------------   --------------
Options outstanding at August 31                                                                 653,334       1,347,500
                                                                                          ==============   =============
Options exercisable at August 31                                                                 357,500         342,500
                                                                                          ==============   =============


                                                                                                2000             1999
                                                                                        ----------------   -------------
Outstanding options issued under Stock Option Plan at August 31                                  543,334       1,237,500
                                                                                        ================   ==============

Outstanding options issued under informal Stock Option Plan                                      110,000         110,000
                                                                                        ================   ==============

Options available for grant under Stock Option Plan at August 31                               1,195,000           5,000
                                                                                        ================   ==============
Option price ranges per share:
   Granted                                                                                             -   $0.05 - $0.11
   Exercised                                                                            $0.19 - $0.375     $0.375
   Forfeited                                                                            $0.05 - $0.375     $0.19 - $0.375
Weighted average option price per share:
   Granted                                                                                           -            $0.073
   Exercised                                                                                    $0.301            $0.375
   Forfeited                                                                                    $0.150            $0.218
   Outstanding at August 31                                                                     $0.129            $0.140
</TABLE>

             The  options at August 31,  2000 had a weighted  average  remaining
contractual  life  of  approximately  6.5  years.  There  were  357,500  options
currently  exercisable  with options  prices ranging from $0.05 to $0.375 with a
weighted average exercise price of $0.16.

             The Company also has an Incentive  Award Plan that  authorizes  the
Board of Directors to grant up to 250,000 shares to key management employees. At
August 31, 2000 there were no shares granted under the Incentive Award Plan.


                                      F-11
<PAGE>

NOTE 5 - INCOME TAXES
---------------------

             During  fiscal 2000,  net  deferred tax benefits  were not recorded
relating to  temporary  differences  since the  Company is not assured  that the
resulting   additional  deferred  tax  assets  will  be  realized.   Significant
components of the Company's deferred tax assets and liabilities are as follows:

    ASSETS
       Net operating loss carryforward                           $     4,596,000
       Other                                                              36,000
                                                                 ---------------
                                                                       4,632,000
       Valuation allowance                                             4,630,000
                                                                 ---------------
       Deferred tax assets                                                 2,000
    LIABILITIES
       Depreciation                                                        2,000
                                                                 ---------------
       Net deferred taxes                                        $             -
                                                                 ===============

             At  August  31,   2000,   the  Company  has  net   operating   loss
carryforwards  available for income tax purposes of  approximately  $12,400,000.
Such carryforwards expire in 2006 through 2020. The Company's ability to use its
existing net  operating  loss  carryforward  may be  jeopardized  or lost if the
Company undergoes an "ownership change" as defined by the Internal Revenue Code.

             The valuation allowance increased $323,000,  net during 2000 due to
the uncertainty of the Company's  ability to generate taxable income and realize
the benefits of deferred tax assets.

NOTE 6 - SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
-----------------------------------------------------

             Selling,  general  and  administrative  expenses  consisted  of the
following  for the five  months  ended  January  31, 2000 and for the year ended
August 31, 1999:
                                                             2000        1999
                                                       -------------   ---------

    Salaries, wages and benefits                       $     544,000  $  924,000
    Advertising                                              318,000     654,000
    Legal and professional                                     7,000     134,000
    Rent                                                      47,000     108,000
    Underwriting and loan closing                            117,000      84,000
    Telephone and utilities                                   37,000      61,000
    Depreciation                                              24,000      47,000
    Other                                                     93,000     164,000
                                                       -------------  ----------

                                                       $   1,187,000  $2,176,000
                                                       =============  ==========











                                      F-12
<PAGE>
NOTE 7 - AFFILIATED PARTY TRANSACTIONS
--------------------------------------

             The  secretary  of the  Company  is a  member  of a law  firm  that
represents  the Company.  Legal fees for  services  rendered by this firm to the
Company  amounted to  approximately  $6,000 during the five months ended January
31,  2000 and  $21,000  during the 1999  fiscal  year.  Legal fees for  services
rendered by this firm to the Company  during the  liquidation  period  beginning
February 1, 2000 through August 31, 2000 amounted to approximately  $7,000. (See
Note 3 concerning notes payable with affiliated parties).

             The  Company  leases  its  principal   executive  offices  under  a
month-to-month  lease  arrangement  from a  corporation  that  is  owned  by the
President,  Chief  Executive  Officer  and a director of the Company and his two
adult siblings. Under the lease arrangement,  the monthly rent was $2,250 during
the months of September 1999 through March 2000 and during the fiscal year ended
August 31,  1999.  The rent was reduced  during the months of April 2000 through
August 2000 to $1,500 each month.

NOTE 8 - CONTINGENCIES
----------------------

             Loans  sold   subject  to  recourse  at  August  31,  2000  totaled
approximately $199,000. The Company may be required to repurchase these loans if
certain  criteria are not met. These recourse  obligations  include $96,000 that
expired subsequent to August 31, 2000 and $103,000 will expire by May 2002.
































                                      F-13


<PAGE>


                                INDEX OF EXHIBITS

3.1       Articles  of  Incorporation   of  RSI  Holdings,   Inc.,  as  amended:
          Incorporated by reference to Exhibit 3.2 and 3.2.2 to the Registration
          Statement on Form S-4 of RSI  Corporation and Porter  Brothers,  Inc.,
          File No. 33-30247 (the "Form S-4").

3.1.1     Articles of  Amendment  and  Certificate  of  Reduction  of Capital of
          Porter Brothers, Inc.: Incorporated by reference to Exhibit 4.1 to the
          Form 8-K of the  Registrant  filed with the  Securities  and  Exchange
          Commission on November 28, 1989, File No. 0-7067.

3.2.1     By-laws of RSI Holdings,  Inc., as amended:  Incorporated by reference
          to Exhibit 3.1.1 to the Form S-4.

3.2.2     Amendments to By-laws:  Incorporated  by reference to Exhibit 3.2.2 to
          the Form  10-KSB  of the  Registrant  filed  with the  Securities  and
          Exchange  Commission  for the fiscal year ended August 31, 1996,  File
          No. 0-18091.

4.1       See Exhibits 3.1, 3.1.1, 3.2.1 and 3.2.2.

4.1.1     Specimen  of  Certificate  for  RSI  Holdings,   Inc.,  common  stock:
          Incorporated by reference to Exhibit 4.1.2 to the Form S-4.

*10.1     RSI  Holdings,  Inc.,  Stock  Option  Plan,  including  an  amendment:
          Incorporated  by  reference  to  Exhibit  10.9 to the Form 10-K of the
          Registrant  filed with the Securities and Exchange  Commission for the
          fiscal year ended  August 31, 1990,  File No.  0-18091 (the "1990 Form
          10-K").

*10.1.1   Amendment  No.  2  to Stock Option Plan:  Incorporated by reference to
          Exhibit  10.9.1  to the Form  10-K of the  Registrant  filed  with the
          Securities  and Exchange  Commission  for the fiscal year ended August
          31, 1992, as amended, File No. 0-18091 (the "1992 Form 10-K").

*10.1.2   Amendment  No.  3 to  Stock Option Plan:  Incorporated by reference to
          Exhibit 99.1 to the Company's Registration Statement on Form S-8 filed
          with the  Securities  and  Exchange  Commission  on  September 9, 1998
          (Commission File No. 333-63109).

*10.1.3   Amendment  No.  4  to Stock Option Plan:  Incorporated by reference to
          Exhibit 99.1 to the Company's Registration Statement on Form S-8 filed
          with the  Securities  and  Exchange  Commission  on February  10, 1999
          (Commission File No. 333-72101).

10.1.4    Amendment  No.  5 to Stock Option Plan:  Incorporated  by reference to
          Exhibit A to the Company's  Definitive  Proxy Statement filed with the
          Securities  and Exchange  Commission on December 30, 1999  (Commission
          File No. 333-72101).

*10.2     RSI  Holdings,   Inc.   Incentive  Stock  Award  Plan,   including  an
          amendment:  Incorporated by reference to Exhibit 10.8 to the 1990 Form
          10-K.

*10.2.1   Amendment  to  Incentive  Stock Award Plan:  Incorporated by reference
          to Exhibit 10.8.1 to the 1992 Form 10-K.

*10.3     Stock Option  Agreement by and between the  Registrant  and Charles M.
          Bolt dated as of July 2, 1997:  Incorporated  by reference to the Form
          10-KSB  of the  Registrant  filed  with the  Securities  and  Exchange
          Commission for the year ended August 31, 1997, File No. 0-18091.
<PAGE>
*10.4     Stock  Option  Agreement by and between the  Registrant  and C. C. Guy
          dated as of April 22,  1998:  Incorporated  by  reference  to the Form
          10-KSB  of the  Registrant  filed  with the  Securities  and  Exchange
          Commission for the year ended August 31, 1998, File No. 0-18091.

*10.5     Stock Option  Agreement by and between the  Registrant  and Charles M.
          Bolt dated as of April 22, 1998: Incorporated by reference to the Form
          10-KSB  of the  Registrant  filed  with the  Securities  and  Exchange
          Commission for the year ended August 31, 1998, File No. 0-18091.

*10.6     Stock  Option  Agreement by and between the  Registrant  and C. Thomas
          Wyche dated as of April 22,  1998:  Incorporated  by  reference to the
          Form 10-KSB of the  Registrant  filed with the Securities and Exchange
          Commission for the year ended August 31, 1998, File No. 0-18091.

*10.7     Stock  Option  Agreement by and between the  Registrant  and C. C. Guy
          dated as of August 18,  1999:  Incorporated  by  reference to the Form
          10-KSB  of the  Registrant  filed  with the  Securities  and  Exchange
          Commission for the year ended August 31, 1999, File No. 0-18091.

*10.8     Stock Option  Agreement by and between the  Registrant  and Charles M.
          Bolt dated as of August 18,  1999:  Incorporated  by  reference to the
          Form 10-KSB of the  Registrant  filed with the Securities and Exchange
          Commission for the year ended August 31, 1999, File No. 0-18091.

*10.9     Stock  Option  Agreement by and between the  Registrant  and C. Thomas
          Wyche dated as of August 18,  1999:  Incorporated  by reference to the
          Form 10-KSB of the  Registrant  filed with the Securities and Exchange
          Commission for the year ended August 31, 1999, File No. 0-18091.

10.10     Subordinated  Promissory  Notes  numbered  1 through  25 issued by RSI
          Holdings,  Inc. payable to the order of the Estate of Buck Mickel. The
          terms of each Note are  identical  to those  set forth in the  exhibit
          except as to the date of the Note and the date of the  first  interest
          payment,  which  are  as  set  forth  in  the  accompanying  schedule:
          Incorporated  by reference to the Form 10-QSB of the Registrant  filed
          with the  Securities  and Exchange  Commission  for the fiscal quarter
          ended November 30, 1998, File No. 0-18091.

10.11     Extension  Letter  dated  December 27, 1999 by and between the Company
          and First Union National Bank:  Incorporated  by reference to the Form
          10-QSB  of the  Registrant  filed  with the  Securities  and  Exchange
          Commission for the fiscal  quarter ended  November 30, 1999,  File No.
          0-18091.

10.12     Convertible  note  issued by the Company  payable to Minor H.  Mickel:
          Incorporated  by reference to the Form 10-QSB of the Registrant  filed
          with the  Securities  and Exchange  Commission  for the fiscal quarter
          ended February 29, 2000, File No. 0-18091.

10.13     Promissory  note dated July 12,  2000 by and  between  the Company and
          First Union National Bank, together with related documents.

10.14     Lease Agreement by and between Hewitt Coleman Companies,  Inc., Lessor
          and  HomeAdd  Financial  Corporation,  Lessee  dated  August 4,  1997:
          Incorporated  by reference to the Form 10-KSB of the Registrant  filed
          with the Securities and Exchange  Commission for the year ended August
          31, 1997, File No. 0-18091.
<PAGE>
10.14.1   First   Amendment  to  Lease  Agreement by and between  Hewitt Coleman
          Companies,  Inc.,  Lessor and HomeAdd  Financial  Corporation,  Lessee
          dated July 7, 1998:  Incorporated  by  reference to the Form 10-KSB of
          the Registrant  filed with the Securities and Exchange  Commission for
          the year ended August 31, 1998, File No. 0-18091.

10.15     Convertible  note dated October 10, 2000 issued by the Company payable
          to Minor H. Mickel.

21.       Subsidiaries of the Registrant.

24.       Consent of Independent Certified Public Accountants.

27.       Financial Data Schedule (For SEC use only)


* Management  contract or  compensatory  plan required to be filed as an exhibit
pursuant to Item 13 of Form 10-KSB.